Zain Iraq faces difficult IPO deadline

Baghdad, July 3, 2011

Zain Iraq faces 'a big challenge' to meet an August deadline to launch an initial public offering and may end up floating less than a regulator-mandated 25-percent stake, its chief executive said.

The operator, a unit of Kuwait's Zain, must become a listed joint stock company by the end of August.

'We have started the process some time ago,' Zain Iraq chief executive Emad Makiya said by email. 'However, meeting the deadline would be a big challenge.'

Under the terms of licences issued in 2007, Zain Iraq and rival operators Asiacell, an affiliate of Qatar Telecom (Qtel), and Korek -- part-owned by France Telecom -- must sell 25 percent of their shares and list on the Iraq Stock Exchange (ISX) by August-end.

With less than nine weeks to the deadline and the holy month of Ramadan due to start in early August, the three carriers have offered only vague assurances of their intentions to list.

'We are talking to the regulator and ISX about what is the best approach for the country,' said Makiya, when asked if he had asked the telecoms regulator -- the Communications and Media Commission -- and ISX about postponing the IPO.

'The CMC and ISX may prefer smaller percentages (to be floated) at the beginning -- we shall coordinate these issues with them,' said Makiya.

Nomura values Zain Iraq at $4.9 billion and Asiacell at $4.4 billion, making quarter stakes in both worth about $2.35 billion combined.

The Iraq bourse's capitalisation currently stands at less than $4 billion, and average daily trading in May was less than $2 million, prompting analysts to question whether the market is ready for the telecoms IPOs.

'This is one of the reasons behind requesting the regulator and ISX to asses carefully market status,' said Makayi, warning Zain Iraq was unlikely to achieve its full valuation in an IPO.

Should the IPO go ahead, Zain Iraq will use the proceeds to finance its expansion and settle 'financial dues', Makayi added. - Reuters